A government plan to cap tenancy deposits at 6 weeks rent threatens to cost Britain’s renters an average of £1391 – and the country up to £6bn – a deposit-free renting boss believes.
The Draft Tenant’s Fees Bill published last week set out government plans to cap tenancy deposits at the equivalent of six weeks rent – rather than the four weeks previously announced – and to ban letting agent fees.
The government claims that the banning of letting agents fees will save renters an average of £350 but renting reformer Ajay Jagota, from the #ditchthedeposit campaign believes renters may in future face increased up-front costs of moving home as a result of the extended deposit cap.
Ajay, founder of deposit-free renting firm Dlighted, said: “This law is supposed to address the affordability of renting, but at this rate many renters are actually going to end up worse off.
London Mayor Sadiq Khan has also claimed that “Ministers have bottled it on their commitment to reduce up-front deposits”
Estimates using average rent figures from Homelet suggest that the average tenancy deposit renters would have to find following the introduction of a six-week tenancy cap, assuming landlords and agents charged the maximum amount, would rise to:
• A national average of £1391 (average rent £927pcm)
• A South East average of £1595 (average rent £1001pcm)
• A London average of £2390 (average rent £1593pcm)
A deposit cap of six weeks could also see the overall amount of cash lost to the British economy in tenancy deposit accounts rise from £4.1bn to £5.9bn.
Ajay Jagota, is founder of deposit replacement insurance firm Dlighted, the deposit-free renting alternative to the cash Tenancy Deposit schemes of TDS, DPS and Mydeposits.
Dlighted’s deposit-free deposit replacement insurance policy offers £600,000 of asset and income protection from unpaid rent, property damage and legal fees while allowing landlords and letting agents to let properties faster by removing the need to charge tenants a deposit.
“This law is supposed to address the affordability of renting, but at this rate many renters are actually going to end up worse off.
“Banning letting agents fees supposedly saves renters an average of £350, but by opening the door to a universal tenancy deposit of six weeks rent the same legislation will cost them four times that. That’s hardly a better deal when they could be renting deposit free.
“Many letting agents and landlords currently charge deposits of four weeks rent, but this legislation pretty much puts it in writing that they should be charging six, raising upfront costs to renters by a third. Sadiq Khan this week claimed the government had ‘bottled’ the deposit cap, and it’s hard to disagree with him.
“Deposit-free renting means landlords and agents renting without risk – the risk of empty properties, the risk of rocketing rent arrears and the risk of unaffordable repair costs or legal fees. It also makes it easier to actually find tenants.
“The government recently announced that 98.5% of cash deposits are returned without a deposit dispute, figures which are worse than the percentage of our tenancies ending in an insurance claim, so there’s little to no evidence that taking a cash deposit improves the behaviour of tenants or the outcome at the end of tenancies either”.